The founder of the Kik cryptocurrency, who has been spoiling for a fight with the Securities and Exchange Commission (SEC), has been granted his wish after the project was hit by an SEC charge for conducting an unregistered ICO. Kik CEO and Kin Foundation founder Ted Livingston has been very vocal in recent weeks about his belief that the ecosystem was suffering because of indecision by regulators to say once and for all whether cryptocurrencies are securities or not. Last week he publicly welcomed a potential SEC case, saying that the matter could finally be decided in court, which he said would be quicker than waiting for the SEC.
Charges Come in Threes
The SEC was already considering a case against Kik, and it finally came through with the charge on Tuesday, accusing the cryptocurrency of “conducting an illegal $100 million securities offering of digital tokens.” The body also suggests that the rationale behind the sale was to quickly raise capital at a time when the company was running low on funds, and that the services for which the token would be used did not exist at the time of sale. Finally, the SEC contends that Kin kept three trillion tokens back that they would sell on the secondary market, after artificially increasing demand in the token to raise the price. This litany of charges shows just how serious the SEC is about the case and the repercussions for the crypto ecosystem could be huge, whatever happens.
Livingston’s Gamble
Livingston’s hopes that a ruling either way will set a precedent in how the authorities deal with ICOs and cryptocurrencies in general, but it might not be so simple, according to prominent crypto lawyer Jake Chervinsky:
Depends on the ruling. District Court opinions aren’t binding precedent, so no matter what, this case won’t answer any big questions (unless it goes up on appeal). It’ll likely affect the SEC’s enforcement strategy going forward, though: if they lose, they’ll likely back off.
— Jake Chervinsky (@jchervinsky) June 5, 2019
Livingston and Patrick Gibbs, partner at Californian law firm Cooley, established DefendCrypto.org last week, a fund designed to help pay for legal costs in the court case that was, at that time, merely anticipated. Now it is actually happening, they will have to beef up the marketing as this looks like it could be a complex, long, and expensive case.
